Panama opens Asia to US LNG exports
Australian megaprojects are under threat from Atlantic basin producers, as expansion of the Panama Canal opens a new LNG trading route, writes Kwok W Wan
Without the Panama Canal expansion, one trader estimated a round trip from the US Gulf coast to Asia could nearly double shipping costs to $6/million Btu, nudging US LNG exports above Australian prices.
"The economics is fine in today's market – US exports could go to any market. By the time [Sabine Pass] comes on stream, the Panama Canal will have been widened and LNG carriers will be able to transit. So it's reasonable to assume quite a bit [of Sabine Pass' LNG] will go to Asia," said Tony Regan, principal LNG consultant at Tri-Zen.
The US already re-exports imported LNG – rather than domestically produced LNG – from Gulf Coast terminals. According to government data, the country has re-exported 24 cargoes since the beginning of 2010. Of these, 12 cargoes went to Asia, nine to Europe and three to South America. But the widening of the Panama Canal will tip the balance further towards Asian deliveries. The upgrade will allow all but two of the global LNG tanker fleet to pass through. By 2014, the LNG tanker fleet is expected to number 433. BG's master plan
BG also has the advantage of operating its own LNG tanker fleet, as well as owning import-capacity rights in the US, UK, Chile and Italy. Last year, BG said that although it had a core fleet of 11, and two flexible vessels, it utilised 17-23 ships at any one time. The company also has upstream shale-gas stakes in the US
, which could be used to hedge its LNG business.
"The issue is what happens if Henry Hub prices go up to $8/million Btu or higher. US exports may still work to most markets, but it's also a neat hedge, because anything BG loses on the LNG cargoes because of higher US prices, it makes up by securing a higher return for its US gas production," Tri-Zen's Regan said.
BG partners Exco in developing shale-gas acreage in the US Haynesville and Marcellus plays. It is also developing the 8.5 million t/y Queensland Curtis LNG (QCLNG) project in Australia – based on coal-bed methane resources – with first cargoes expected in 2014. From QCLNG, BG has already secured a 3.6 million t/y purchase deal with China's CNOOC and a 1.2 million t/y agreement with Tokyo Gas.